Thoughts on recent Ninth Circuit and California appellate cases from Professor Shaun Martin at the University of San Diego School of Law.

Tuesday, August 18, 2009

People v. Hochanadel (Cal. Ct. App. - Aug. 18, 2009)

A mixed bag (pardon the pun) today for pot dispensaries in California. On the one hand, the Court of Appeal uphold the dispensary provisions of the Medical Marijuana Program Act against various challenges -- a result that's huge for storefront operations. On the other hand, with respect to the particular defendants here (the proprietors of "Hempies" in Palm Desert), the Court of Appeal reverses the dismissal of the charges against 'em and confirms that dispensaries can't be "primary caregivers" under the Compassionate Use Act (though they may be permissible "collectives").

So check it out if you're a big medical marijuana person.

It's also an informative opinion for those of us sitting on the sidelines, especially since the factual recitations of the opinion go into a fair amount of detail about the financial condition of the business here. For example, I was surprised at both the volume of business -- the store had annual revenues of $1.7 million a year -- as well as its precarious financial status, with expenses of $2.6 million even without including rent and utilities. That may make for a good internet startup in the old days, but I didn't realize that dispensaries were "upside down" in this fashion.

Plus I thought it was interesting that the dispensary here apparently sold weed for above market costs, which I had always thought was opposite of how these things generally worked. Hempies was apparently selling pot for $260/ounce (and other weed for $260/half-ounce). Based on my very limited knowledge of the market, I initially thought that sounded somewhat reasonable (at least the former), but apparently that's around twice the price of mid-grade chronic on the street. And even at that, they still can't make a profit.

My interest in this topic has been piqued lately because I have lately started hearing radio advertisements for medical marijuana dispensaries -- something that I've never heard before. They're invariably on the "hard core"/progressive music stations, which both proves that the advertisers know their market as well as is likely indicative of what types of stations are probably willing to accept these ads.

Still, I found it fascinating that we now have mass media avertisements, over federally regulated airwaves, for a product that is indisputably illegal to possess or sell. We clearly live in a rocking world.